Tuesday, April 15, 2014
2014 Session Contains
Less Controversy, More Substance
The Alabama Legislature met its goal for the final year of the quadrennium to finish quickly with the least conflict possible so members could concentrate on the 2014 election season. Along the way, the Legislature also enacted substantial legislation, including bills significant to retailers.
During this session, three major items on the Alabama Retail Association’s 2014 State Legislative Agenda became law:
- An independent tax appeals process.
- Raising the average monthly tax liability threshold at which a business must estimate and make monthly sales tax payments to the state.
- Requiring businesses to provide an identifying number when applying for business or other licenses. This is seen as a crucial first step toward business license reform.
Four other major bills that Alabama Retail supported or advocated for in the session also become law:
- An electronic draft soon will be considered a negotiable instrument, making it a crime to use electronic checks in bad faith.
- Modernization of sales tax law related to prepaid wireless services.
- Prohibition against claiming a patent infringement in bad faith.
- Two additional options for filing business personal property returns: A shortened tax form and ultimately, an online filing system.
As usual, your association did its fair share of stopping detrimental legislation. Flawed bills blocked in 2014 included legislation that would have:
- Broadened the state’s catfish country-of-origin notification law.
- Established a factor presence nexus standard for business activity for income tax purposes.
Alabama Retail tracked the progress of 125 of the 1,103 bills introduced during the 2014 session, some that passed, some that failed and some that will be back next year.
An account of how select bills – among those Alabama Retail supported, opposed or monitored – fared during the 2014 regular session follows. The May issue of Alabama Retail Quarterly will include an abbreviated 2014 session summary.
NOW LAW
Of the 1,781 bills and resolutions presented during the 2014 regular session, 457 become law. Some of those new laws impact how retailers do business, including those summarized here.
ALABAMA RETAIL AGENDA IN ACTION
The Alabama Retail Association saw great success this year with its 2014 State Legislative Agenda. These bills on the retail agenda became law:
Independent Tax Appeals Coming Oct. 1
After at least 15 years of advocating for an independent tax appeals process, Alabama’s business community will finally get what they want come Oct. 1. Act No. 2014-46, or the Taxpayer Fairness Act of 2014, by Rep. Paul DeMarco, R-Homewood, and Sen. Bryan Taylor, R-Prattville, makes Alabama the 32nd state with a tax appeals process removed from the collecting authority. “The judge who decides your fate will no longer be an employee of the taxing authority you disagree with,” said Alabama Retail President Rick Brown and chairman of the Business Associations’ Tax Coalition (BATC), a coalition of 27 business trade associations that pushed for the Alabama Tax Tribunal.
>> Learn more about the Taxpayer Fairness Act of 2014
4,000 Small Retailers Can Start Remitting
Sales Tax After the Fact in August
At least 4,000 small retailers will see one-time tax relief of up to $2,500 under the Small Business Tax Relief Act, or Act No. 2014-316 by Rep. Barry Moore, R-Enterprise, and Sen. Bryan Taylor, R-Prattville. Retailers collecting on average less than $2,500 in state sales taxes each month, about $62,500 in monthly sales, will no longer have to estimate their sales tax obligation in advance each month starting Aug. 1. Those between the current $1,000 and the new $2,500 threshold for average monthly state sales tax collection during the previous year effectively would be allowed to skip a month (August) of making estimated sales tax payments and instead remit the actual August taxes collected in September.
Better Business License
Identification Begins Oct. 1
Starting Oct. 1, those applying for or renewing a business license will have to include their business federal identification number or a Social Security number under Act No. 2014-430 by Sen. Slade Blackwell, R-Birmingham, and Rep. Terri Collins, R-Decatur. The new law is a first step toward city/county business license reform, because it will give the state better information as it considers ways to streamline business licenses.
As of July 1, Bad Check Law
Extends to Electronic Versions
Starting July 1, electronic drafts will be considered negotiable instruments and thus subject to criminal penalties if used to purchase goods knowing that the funds are not in place to cover the draft. The penalties under Act No. 2014-444 by Rep. Mike Hill, R-Columbiana, and Sen. Scott Beason, R-Gardendale, will be the same as presenting a bad check.
Attorney General to Begin Investigating
Complaints against Patent Trolls
By July 1, Alabama will be among several states with a law that combats patent trolls. The attorney general will be responsible for investigating complaints against those who assert patent infringement in bad faith. Act No. 2014-218 by Sen. Arthur Orr, R-Decatur, seeks to discourage patent trolls, entities that do not produce or sell any products or administer services but are created solely to generate a revenue stream from patents. The Alabama Retail Association is part of the Main Street Patent Coalition, which seeks to stop frivolous lawsuits filed against restaurants, supermarkets, hotels and other brick-and-mortar businesses by patent trolls, or patent-assertion entities.
New Limited Liability Law Effective Jan. 1
Beginning Jan. 1, more state businesses are expected to create their limited liability companies in Alabama under Act No. 2014-144 by Rep. Paul DeMarco, R-Homewood, and Sen. Rodger M. Smitherman, D-Birmingham. Under the new law, the implied contractual covenant of good faith and fair dealing cannot be eliminated. It also provides for the formation and recognition of series LLCs.
Starting This Summer No Confusion
on Sales Taxes Due on Prepaid Wireless Service
As of July 1, Alabama will have a sales tax law related to prepaid wireless services updated for the 21st century. Act No. 2014-336 by Rep. Bill Poole, R-Tuscaloosa, makes it clear that even in the absence of a physical card, sales tax is owed on prepaid wireless services. The law also adds definitions to match today’s technology to include other digital products and content that are paid for in advance and sold in predetermined amounts that the consumer can use until the amount is consumed. The updates will apply to all open tax periods.
Short Form for Business Personal Property Returns
and Eventual Online Filing Coming Soon
Alabama businesses will soon have new options for filing business personal property returns under Act No. 2014-415 by former Rep. Greg Wren, R-Montgomery. By Oct. 1, small businesses that have filed an itemized personal property tax return that included $10,000 or less in total property acquisition costs in the previous tax year can use a new short tax form. If the short form is used, $10,000 would be used by the local tax assessor as the market value when calculating taxes due, rather than an itemized return. The average tax liability would be less than $100 for businesses in most localities. By Oct. 1, 2016, businesses will also have the option of filing business personal property tax returns online, giving business owners a one-stop-shop for submitting those taxes to each of Alabama’s 67 counties. Counties can establish their own electronic collection system as Shelby County already has. Baldwin County enacted an electronic personal property tax filing system during this legislative session.
Law Allows Revenue Dept. to Suspend
Administratively Costly Taxes
Starting July 1, the Alabama Revenue Department can suspend the collection of a tax or fee when the administrative costs of collecting exceed the collection amount for each of the previous three fiscal years. Alabama’s tax on playing cards may be one of the first taxes to be suspended by administrative rule under Act No. 2014-331 by Rep. Jim Patterson, R-Meridianville.
Tobacco Tax Enforcement Overhaul Effective Oct. 1
Retailers have until Oct. 1 of this year to gear up for a revision to the state’s tobacco tax enforcement.
Among other provisions, Act No. 2014-262 by Rep. Mike Jones, R-Andalusia, and Sen. Bill Hightower, R-Mobile, requires retailers to maintain at their individual stores 90 days of computer and machine-generated invoices for tobacco products the stores buy with the tobacco tax stated separately. After 90 days, the records must be maintained for three years from the date of purchase but they don’t have to be kept at the store itself.
Single Tax Credit Transfer
Allowed for Historic Properties
Tax credits for historic rehabilitation, preservation and development can be transferred once under Act No. 2014-452 by Rep. Paul DeMarco, R-Homewood. The credits are transferrable for the tax period that began Jan. 1 of this year. Alabama allows up to $20 million statewide in annual tax credits for such projects. The maximum credit for a commercial project is $5 million. The tax credits are awarded on a calendar-year basis. The intent is to encourage more investors to redevelop historic properties for retail and other businesses.
Law Allows State Agencies
to Buy from Retailers Outside Bid Process
State agencies can now purchase personal property valued under $15,000 from retailers or vendors within Alabama that are not on the statewide contract or bid list under Act No. 2014-378 by Sen. Arthur Orr, R-Decatur. To be able to purchase off the bid list, the purchase price must be at least 10 percent less than the statewide contract price, and it must be a market price readily available to the public at large. The offer also must conform to the terms and conditions of the statewide contract and the Division of Purchasing must certify that the offer satisfies the criteria before any purchase can be made.
Alabama Now Bans Cities, Counties
from Mandating Leave Time for Private Employees
Alabama cities and counties cannot pass laws that would require an employer to grant vacation or other leave time that is not required by state or federal law under Act No. 2014-173 by Rep. Jack Williams, R-Birmingham, and Sen. Rusty Glover, R-Semmes.
EBT Cards No Longer Accepted for Alcohol,
Tobacco and Other ‘Sin’ Products and Services
Contractors for payment machines in liquor stores, bars, tattoo parlors, strip clubs and casinos will have to reconfigure those machines by July 1 so they do not accept Electronic Benefit Transfer, or EBT cards. Act No. 2014-419 by Sen. Arthur Orr, R-Decatur, prohibits those on welfare from using public benefits to buy alcoholic beverages, tobacco products or lottery tickets or using those benefits in a bar, casino, tattoo facility, for psychic services or adult entertainment. At the request of the Alabama Retail Association, retailers are not responsible for policing this law, nor does the law punish retailers whose customers violate the law.
Legislature Increases Allowed
Workers’ Comp Burial Expenses
Starting July 1, the allowed burial expenses stemming from a workers’ compensation claim will be $6,500 under Act No. 2014–240 by Rep. Rod Scott, D-Fairfield.
Law Redefines Employing Unit
For a new owner to keep the unemployment compensation rates of a purchased company, the employer must acquire and maintain at least 65 percent of another employing unit in Alabama under Act. No. 2014-436 by Sen. Clay Scofield, R-Guntersville, and Rep. Wes Long, R-Guntersville. The law is effective July 1.
Three Cities to Consider Sunday Sales
The voters of Gadsden (Act No. 2014–213 by Rep. Craig Ford, D-Gadsden), Tallassee (Act No. 2014–309 by Sen. Jerry Fielding, D-Sylacauga) and Goodwater (Act No. 2014-159, also by Fielding) will soon get to decide if alcohol sales will be permitted in those cities on Sundays under laws adopted this session.
Pike County and Enterprise Could Add Draft Beer
The local governing bodies in Pike County and its incorporated cities (Act No. 2014–282 by Sen. Brian Taylor, R-Prattville) along with Enterprise (Act No. 2014–265 by Rep. Barry Moore, R-Enterprise) can now allow draft beer sales for those locations if they desire.
Alabama’s Cork-and-Go Law Aligns with Federal Law
Restaurant patrons who don’t finish their wine now must transport their recorked or resealed bottles where the vehicle’s driver can’t reach it under Act No. 2014-164 by Sen. Paul Sanford, R-Huntsville, and Rep. Terri Collins, R-Decatur. The new law reflects federal standards so Alabama can continue to receive federal transportation money.
Wine Supplier/Wholesaler
Relationships Reformed in Two Counties
New laws outline the parameters for the wine supplier/wholesaler relationship in Montgomery (Act No. 2014-223/Act No. 2014–263 by Sen. Dick Brewbaker, R-Montgomery, and Rep. John Knight, D-Montgomery) and Shelby counties (Act No. 2014 – 209 by Rep. Mike Hill, R-Columbiana).
Wet Community Development Districts
Can Become Wet Cities
The state’s community development districts can remain wet once the district becomes a municipality, even if the newly incorporated city does not have the 1,000 residents required by state law to be a wet municipality under Act No. 2014-87 by Rep. Jamie Ison, R-Mobile.
NOT LAW
More than 1,300 bills and resolutions died from inaction when the Alabama Legislature ended its 2014 regular session on April 4. The good news is that no legislation Alabama Retail actively opposed became law. Many bills of concern to retailers also died. Among the bills that did not become law are:
No Expansion of Catfish Origin Notification
Unwarranted legislation that would have required restaurants, grocery delis and other food service establishments to notify customers of the country of origin for the entire catfish species order, Siluriformes, died on the Senate floor. SB335 by Sen. Bobby Singleton, D-Greensboro, originally also would have required restaurants and delis to notify customers of the country of origin on menus only and would have banned notification via a sign or tabletop display. Alabama Retail convinced the sponsor to delete that burdensome provision. Companion legislation, HB432 by Rep. A.J. McCampbell, D-Livingston, died in the House Agriculture and Forestry Committee.
The law at both the federal and state levels defines catfish as only those fish belonging to the Ictaluridae family, which is the North American family of catfish. Anything else advertised or labeled as catfish is considered fraud. Since Alabama’s law was enacted in 2009, the Alabama Department of Public Health said there have been no violations.
Alabama’s Minimum Wage
Still Same as Federal Minimum
Two bills to create a minimum wage in Alabama never made it out of committee. HB279 by Rep. Darrio Melton, D-Selma, would have created an hourly minimum wage of $9.80 by Jan. 1, 2016, while SB295 by Sen. Bobby Singleton, D-Greensboro, called for a $12 state hourly minimum wage. Alabama uses the minimum wage set by federal law.
Alabama Doesn’t Go Out on a Limb
and Establish Factor Presence Nexus
Legislation that would have established a factor presence nexus standard for business activity for income tax purposes in Alabama died in a House committee. HB548 by Rep. Rod Scott, D-Fairfield, would have made Alabama’s standard for establishing substantial nexus different than any other Southern state and the majority of the other U.S. states.
Congress is trying to craft a federal standard. The Business Activity Tax Simplification Act, H.R. 2992, seeks to create a predictable standard for nexus-causing activity in interstate commerce throughout the country.
Once again, proposed cigarette tax increases went nowhere during the legislative session. Neither a $1-a-pack increase (HB120 by Rep. Joe Hubbard, D-Montgomery), nor an increase from 42.5 cents to 75 cents per pack (HB39 by Rep. Patricia Todd, D-Birmingham) ever made it out of committee.
Lawmakers proposed several bills that would have eliminated or replaced sales tax on food in 2014:
- SB287 by Sen. Gerald Dial, R-Lineville, would have reduced sales tax on food as defined by the federal Supplemental Nutrition Assistance Program (SNAP) to zero while increasing the state sales tax on other items to 5 percent. As it did in 2013, Dial’s bill received committee approval but never made to the Senate floor for debate.
- HB130 by Rep. John Knight, D-Montgomery, a state constitutional amendment to remove the 4 percent state sales tax from groceries and over-the-counter drugs, failed to be considered for a seventh year in a row.
- SB471 by Sen. Brian Taylor, R-Prattville, would have phased out state sales and use tax on food while increasing the state tax on cigarettes over a four-year period. It was introduced too late in the session to even be considered.
- HB596, also by Knight, would have exempted food from the state sales and use tax during the 40-day season of Lent. It never received committee consideration.
Healthcare Rights of Conscience
Never Gets Floor Vote
HB31 by Rep. Becky Nordgren, R-Gadsden, which would have given healthcare providers, including pharmacists, the right to refuse some reproductive healthcare services that violate their conscience received committee approval but never received a Senate vote. Similar legislation also has failed to make it through the legislative process in prior sessions.
Committee Snuffs Out Smoking Ban
The House Health Committee voted down a Senate-approved statewide smoking ban, SB168 by Sen. Vivian Figures, D-Mobile. The bill would have banned smoking statewide in any workplace, public building or public place with exemptions for bars, cigar bars, private clubs, retail tobacco stores and certain outdoor areas. Under the bill, inhaling electronic cigarette vapor also would not have been considered smoking. This is the 16th straight year Figures’ has introduced this legislation.
LEGISLATION LIKELY TO REAPPEAR
Legislation sometimes takes years of introduction and debate before it becomes law. Likely among bills to resurface in 2015 are:
Business License Reform Will Be Back in 2015;
Task Force May Appear Earlier
Some progress was made this session toward simplifying and streamlining Alabama’s business license system, a major tenet of the Alabama Retail Association’s 2014 legislative agenda (See ALABAMA RETAIL AGENDA IN ACTION above). There also was a minor setback.
Gov. Robert Bentley on April 11 pocket vetoed SJR43 by Sen. Slade Blackwell, R-Mountain Brook, which would have created a Municipal Business License Interim Task Force to study and develop recommendations for streamlining the application for and payment of municipal business licenses. Alabama Retail continues to be in conversation with the governor about establishing such a task force to recommend changes to Alabama’s local business licensing system by the start of the 2015 regular session.
With or without a task force, legislation to reform Alabama’s cumbersome and confusing business licensing system is expected to be among bills considered in the next regular session.
Workers’ Compensation Reform
May Resurface in 2015
Although workers’ compensation reform legislation, which had been introduced in 2013, did not reappear this year, a strong possibility exists for such legislation in 2015. Alabama Retail will continue to monitor the progress of any efforts to manage workers’ compensation costs more effectively.
Amount that Qualifies as Small Claims
Could Increase in 2015
SB170 by Sens. Jerry Fielding, R-Sylacauga, and Del Marsh, R-Anniston, which would have doubled the amount of claims that can be settled in small claims court, passed the Senate and a House committee, but never received House consideration.
The bill would have increased the jurisdiction of the small claims division of Alabama’s district courts to cover all cases in which the amount in controversy is $6,000 or less. The small claims division currently oversees controversies involving $3,000 or less.
Health Savings Account
Exemption Proposal May Return
SB71 by Sen. Paul Sanford, R-Huntsville, which would allow health savings account contributions to be exempt from state income tax ran out of time this year. In the last week of the session, the bill received approval from a House committee but never made it to the House floor for a vote. The bill would have allowed exemptions up to the maximum annual amount permitted under federal law for health savings accounts. Expect to see similar legislation to resurface next year.
Back-to-School Sales Tax Holiday
Expansion Could Reappear
An expansion of the state’s annual back-to-school sales tax holiday to include certain uniforms and musical instruments received committee approval but never got a floor vote. Something similar to SB382 by Sen. Bryan Taylor, R-Prattville, or HB521 by Rep. Randy Davis, R-Daphne, may be introduced again in 2015.
Workers’ Comp Exemption
for LLC Members Could be Back
In the final week of the session, the House Commerce and Small Business Committee approved SB304 by Sen. Cam Ward, R-Alabaster, which would have allowed members of a limited liability company to exempt themselves from Alabama Workers’ Compensation Act coverage on a year-by-year basis. Time ran out before the bill could make it to the House floor for final consideration. Similar legislation may be reintroduced in 2015.
ELECTIONS
Retail Association PACs Make Endorsements
Alabama RetailPAC, the Alabama Retail Association’s state political action committee, and Alabama Retail Association PAC, Alabama Retail’s federal political action committee, last week made its initial endorsements in advance of the 2014 campaign cycle.
Retail Voter Guides will be mailed to Alabama Retail members in advance of the June 3 primary for distribution to your employees, associates and family.
>> Alabama Retail Endorsements News Release
>> Election section of Alabama Retail website
>> Election Calendar
>> Communicating about Elections
NEXT LEGISLATIVE DAY
A newly elected Alabama Legislature will meet Tuesday, Jan. 13, 2015, for its organization session. The Alabama Legislature will convene at noon Tuesday, March 3, 2015, for the first legislative day of the 2015 regular session.
FEDERAL
Look for SNAP Benefit Changes
The Food and Nutrition Service of the U.S. Department of Agriculture today began distributing a notice to authorized Supplemental Nutrition Assistance Program, or SNAP, retailers of imminent changes to the SNAP program, which include:
- SNAP benefits cannot be used to pay bottle/can deposits unless it is a state-required fee.
- SNAP retailers must pay for their own Electronic Benefit Transfer (EBT) equipment.
- New SNAP retailers cannot use manual vouchers to redeem SNAP benefits.
- SNAP benefits may be used to purchase Community-Supported Agriculture shares.
